Venezuelan Economic Growth Slowed More Than Forecast to 0.7%

Venezuela’s economy grew
less than economists forecast in the first quarter as
fewer government dollar sales to importers resulted in the worst
currency shortages since 2008.

Gross domestic product expanded 0.7 percent from a year
earlier, the slowest pace since the last three months of 2010,
the central bank said in a statement published on its website.
The median forecast of eight analysts in a Bloomberg survey was
for growth of 1.1 percent. GDP had expanded 5.5 percent in the
fourth quarter and 5.6 percent in 2012.

“We’re seeing a slowdown in the economy which I’m sure
will enter recession in the second quarter,” said Francisco Rodriguez, an economist at Bank of America Corp., in a phone
interview from New York. A reduction in dollar sales “was much
stronger in March so that surely it it will show more in the
second quarter,” he said.

The government has held only one dollar auction since
devaluing the bolivar in February, limiting companies from
accessing the foreign currency they need for imports. The
scarcity index, which measures the amount of goods that are out
of stock in the market, rose to 21.3 percent in April from 20
percent the month before.

The government cut the rate of fiscal spending by 3.1
percent in the 23 weeks after late President Hugo Chavez won the
Oct. 7 elections, Bank of America Corp. said in a March 20
report. Chavez died from cancer on March 5.

Economy in Turmoil

“The Venezuelan economy has suffered turmoil, the
president’s death has upset us all,” central bank President
Edmee Betancourt said May 30.

Inflation has accelerated as shortages mount, reaching 29.4
percent last month from 18 percent in November last year. Prices
rose 4.3 percent in April from March, the fastest growth since
April 2010.

A devaluation of 32 percent in the bolivar in February has
failed to revive the flow of dollars into the economy.

The government is taking action, Finance Minister Nelson Merentes said May 26, reducing by half the delivery time of
dollars to 2,000 companies that import essential items.
Moreover, the new Sicad complementary foreign exchange system
will become more flexible by allowing more companies to
participate, Merentes said on May 30, adding that he didn’t know
the date for the next dollar auction.

Venezuela posted a current account surplus of $1.74 billion
up from a gap of $598 million in the fourth quarter of 2013,
while the capital account recorded a $3.39 billion deficit.

Total imports grew 1.5 percent to $13.9 billion in the
first quarter after the government imported about 21 more than
the same period a year earlier. The private sector imported 10.6
percent less.

Venezuelan oil exports fell 5.6 percent in volume, the
report said. Venezuela reported $21.36 billion in oil exports in
the first quarter, 13 percent less than the same period a year
earlier.